Friday, August 15, 2008

Three peaks pattern and fat pitch update

The HUI index has finally confirmed a Three peaks and a domed house top pattern. This is a less well known pattern documented here. There are a few important points to make about teh current configuration of the HUI chart. First, the three peaks pattern says price always returns to point 10. Well, this pattern showing on my chart is pretty tough to interpret with respect to the troughs. The peaks are pretty clear, but the troughs are subject to interpretation. My feeling is that point 10 is best defined by the August 2007 low of 276. That is also just a point away from two very important confluences. The best fit head and shoulders neckline show has a measured move to that point. Also the 50% fibonacci retracement level of the entire bull market to date is at that level. This is strong evidence that that level is a attractor. In strongly trending markets levels of this importance can be breached significantly. The key is that they are attractors and their supports are often only bent temporarily. So I therefore have to consider what hidden pivots may be within reach in a crash scenerio. The chart shows a neat fibonacci expansion and a pivot I think is meaningful. Lets face it. If this market is crashing stops at the most convenient fib level are going to get blown out. Lets see what happens next week.

Once these measured moves are completed and this capitulation of sorts runs its course the HUI weekly chart will sport a 3-3-5 corrective wave. These are usually part of flats. To me this suggests a strong wave up followed by another likely correction and retest of the lows. This could take place over many months.

Where do we stand on the xau/gold ratio? I suggested many months ago that this ratio could be continuing its secular downtrend. Well that has been confirmed and we are in crash mode in the xau/gold ratio. The stocks are acting like calls on the price of gold where they are not just out of the money but are near expiration. This is a tough position to be in, but it also suggests we are near in time to the end of the old game and beginning of the new game.

S.M. Himes

Wednesday, August 6, 2008

The fat pitch of the century

Well considering I haven't posted for so long I have to wonder who is still reading my blog. Honestly lifes many demands have kept me from doing the proper service to this forum. For that I apologize. The time has come which I consider so important I must post some comments. I hope to provide some analysis in the days ahead to backup what I think is happening in this sector. There are some well known facts now in this sector. 1) We have a clear and defined top for gold coincident with the Bear Sterns fear culmination. 2) A low breadth rally occured in the PM shares generating the HUI 519 highs. A failed secondary rally occured, a head and shoulders pattern setup on the daily , and the neckline has been breached. 3) The junior sector has been in a terrible bear market now for many months. 4) Shares are trading at a severe discount to gold suggesting that either the shares are undervalued or the bull is just over. These are just some of the facts and they all sound very bearish dont they? Would you say we are in the opening act or the closing act? These are serious questions. I think this market will take us to some crazy extremes. In my opinion we are in one of those extreme events right now. I think we are getting a fat pitch in the shares. We'll have to see how this month progresses, but I think there is a decent chance that the time is now. I have my targets for the downside and they are quite low and soon. The good news of course is what happens thereafter. Im not sure many fathom what we are looking at.

more to follow soon

S.M. Himes

Gold Seasonality

Gold Seasonality
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